BCCI vs Lodha Panel: Poor Management of our Financial Institutions

In the fight for money including its management and allocation, Bank of Maharashtra (BoM) have communicated the Board of Control for Cricket in India (BCCI) about their intention of freezing BCCI’s bank accounts. They sent a letter to BBCI informing the same. This step has been taken in accordance with a directive from Supreme Court-appointed Justice Lodha Committee. They have been working for possible constructive reforms with this cricket controlling body. Cricket is considered to be a religion in India and the news came as a shock to many.

As per reports, not only BoM but Yes Bank, who is also a lender to BCCI freeze their accounts. Although the accounts have been activated later in the afternoon, the initial step came as a consternation for BCCI authorities. The matter created a havoc in the media as Justice Lodha was denying that the Committee gave any such directions to banks to stop funding BCCI’s routine expenditures, including the expenses of ongoing New Zealand series. Justice Lodha clarified that they only communicated banks regarding blocking the further disbursements of funds to state units.
Lodha did clarify the situation but the letter does give an impression that the bank was specifically asked to freeze BCCI’s accounts. This is the entire controversy in a nutshell.

Prima facie, it is a complete situation of mismanagement and panic created by banks as there are some basic due diligence, processes, and commitments of a bank to an account holder, which they can’t waive off on their own. And, secondly, the banks are advised to thoroughly go through any communication made to them as the Lodha panel report shows that the former asked the board not to proceed with fund disbursements to state associations.

Quoting the Lodha letter, “It has come to the notice of this committee that certain decisions have been taken at the ‘Emergent Working Committee’ meeting of the BCCI on 30 September 2016, to disburse large funds to various member associations. You are aware that by way of this committee’s direction dated 31.8.2016, no further decisions were to be taken regarding the future apart from routine matters. The disbursement of these amounts are not routine, and in any case, not emergent.”

It added, “You are also aware that the BCCI has chosen to breach the judgment of the Hon’ble Supreme Court as well as the first set of timelines set out by this committee, which includes the fund disbursement policy to be framed by 30.9.2016. As the status report is to be taken up for directions by the Hon’ble Court on Thursday, 6.10.2016, you are hereby directed not to take any steps towards financial disbursement of the amounts as resolved/approved, after the direction dated 31.8.2016. Any violation of this direction will be placed before the Hon’ble Supreme Court for appropriate directions.”

Hence, the whole point here is: In the BCCI-Lodha episode, what the panel asked the BCCI was only to stop funding to the state associations, and not to stop funding for routine expenditures of the cricket body. But the banks had clearly misread the zest of the letter as an order from the Supreme Court to suspend the accounts. This surely raises a question about how responsible our banking institutions and financial management institutions are regarding their account holders, especially when panic attacks strikes them.



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